Market Review December 2019

  • Robert Santarpia

Stock markets finished 2019 strong. With jobs numbers outperforming expectations and the China trade war seemingly coming to a resolution for phase one, optimism was abundant.

December Jobs Numbers Double Expectations, End Strong Year

The U.S. economy saw an increase in 312,000 jobs in December according to the U.S. Bureau of Labor Statistics handily beating consensus estimates of 178,000. The Washington Post reported unemployment rose to 3.9% from 3.7% as more people came into the labor market looking for work, a very good sign at this stage of the economic expansion. The share of the adult population either employed or looking for work currently stands at 63.1%, the highest level since 2014. The job market has more capacity to expand than many previously believed. The report shows that middle and low wage workers are getting a piece of the action as the job market gets tighter and wage trends increase.

Company Bankruptcies Account for Significant Job Cuts in 2019

The U.S. job market finished 2019 in excellent shape. Continued skepticism is a product of more minute areas of worry, including the number of companies declaring bankruptcy. The Wall Street Journal reported corporate bankruptcies in 2019 accounted for more job loss than any other point in the past decade.

The report notes that most of the major bankruptcies occurred in the first half of 2019. Store closures don’t always accompany bankruptcy, but job losses always occur during bankruptcies. The total job loss from corporate bankruptcies accounted for 62,100 less jobs in 2019. The number is the highest in the United States since 2005. As more brick and mortar-based retailers struggle to find footing in the digital retail world, the trend is expected to continue.

Stock Market Closes 2019 as Best Year Since 2013

Perhaps the best news of 2019 was the outstanding performance of U.S. equities which Bloomberg reported finished as the strongest year since 2013.

The Nasdaq 100 is up 35% and the S&P 500 increased in value by 29%, accumulating to a record $5.9 trillion in increased value. According to Standard and Poors, the S&P 500 P/E ratio based the on the prior 12 months earnings is 24.23 compared to 19.6 at the beginning of 2019 indicating investors were willing to pay up for earnings in 2019. The S&P earnings for 2019 grew at 8.4%, far less than the 29% increase in stock prices.

China’s Market Finishes Decade In the Red

The Wall St Journal reported that China’s Shanghai Composite Index dropped 6.9% from 2009-2019 while the S&P 500 nearly tripled. China’s market has been likened to a casino dominated by individual investors, lacking the stability of slower and more patient institutional investors. Many of the listed companies are inefficient and corporate governance has been patchy at best, making trust and confidence illusive. Even if companies do become more efficient and focused on returns, they can no longer count on superfast economic expansion to underpin growth. Bank of America expects 2020 growth to come in a at about 5.6%, much slower than the average growth of the last decade. The prior 10 years growth rate as reported by the World Bank is illustrated below.

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